Bestwall obtains reversal of collateral attack on bankruptcy court subpoenas

Client(s) Bestwall LLC

Jones Day represented Bestwall, LLC, a Georgia-Pacific affiliate, in successfully opposing a collateral attack by asbestos tort claimants and trusts on subpoenas issued in Bestwall's ongoing Chapter 11 bankruptcy case in the Western District of North Carolina. The bankruptcy court had granted Bestwall's Bankruptcy Rule 2004 motion and authorized Bestwall to issue subpoenas to discover the extent to which Bestwall's claimants had submitted claims to ten asbestos trusts established in bankruptcy cases filed by other companies. The bankruptcy court found that the information sought by Bestwall was relevant to an estimation of its asbestos liability and the formulation and confirmation of a Chapter 11 plan. The trusts themselves did not object to Bestwall's motion in the bankruptcy court; instead, their claims-processing agent appeared and opposed the subpoenas, unsuccessfully. The trusts, joined by certain claimants, then moved to quash the subpoenas in the District of Delaware, successfully. As the Third Circuit described this tactic, the trusts "chose to let [the claims-processing agent] carry the fight in the first instance and to keep themselves in reserve for a rearguard action." Bestwall appealed, and the Third Circuit reversed the quashing order, holding, as Jones Day argued, that issue preclusion barred the trusts' and the trust-claimants' collateral attack on the subpoenas in the district court. It explained that the trusts' approach may be "prudent in battlefield strategy," but "in litigation risks issue preclusion, and that risk has been realized here." The Third Circuit's published opinion issued with instructions to enforce the bankruptcy court's original subpoenas, and the trusts produced the subpoenaed materials.

In re: Bestwall LLC, No. 21-2263 (3d Cir.)